Archive for June, 2012

Owing back taxes to the IRS can be a financial drain and an added stress. However, when you take advantage of the Offer-in-Compromise (OIC) program – one of several tax debt payment plans the IRS offers – you can move on past your tax debt sooner than you may have thought possible! Let’s take a look at some of the basic information surrounding the Offer-in-Compromise tax debt payment plan!

Is It For You?

You’re probably wondering if Offer-in-Compromise is right for you. Of course, there are many tax debt payment plans, and you should seek counsel to determine which is the right path for you. The Offer-in-Compromise program is most suitable for people who owe more back taxes than they could ever pay.

When you apply for OIC, you should expect to reveal all the details of your personal financial situation. As with any of the IRS’s tax debt payment plans, this one requires a lot of transparency on your part.

When you apply for settling your back taxes this way, the IRS will consider your application based on four factors: your ability to pay, income, assets, and expenses. If you are determined to be eligible, then you will be allowed to pay less than the full amount of back taxes you actually owe.

For everything you need to know about the Offer-in-Compromise program, see the Form 656 Booklet.

Once you have found yourself in tax debt, you should begin looking for a way out. We do not always have the ability to simply pay all of our debt upfront and in one installment.

Though this is the preferred process by the IRS, it is not always the most rational choice. Sometimes you just may be unable to make such a large payment at once. The IRS recognizes this and they give options to you in order to complete your tax obligations. If you find yourself in a situation where you cannot make one single payment to level up, then you should next explore these options.

Paying Back my Tax Debt

Option number one is to investigate an IRS installment agreement. With an installment agreement, you are able to fulfill your obligation through a number of large installment payments. The benefit to this type of agreement is that you can avoid any fees if you are able to pay the balance within 120 days. So, by simply applying online or calling up an agent and asking, you can give yourself three more months to take care of your debt. If it will take you more than three months then you must pay fees to set up an agreement that allows the funds to be paid by direct debit or by payroll deduction.

The next option to investigate is an installment plan. With an installment plan you will be agreeing to make monthly installments in order to pay off your tax debt. This should always be your second option. The main reason being that you will end up paying more in the long run because of the upfront fees you will also be charged for interest on your account.

When you avoid paying taxes you are setting yourself up for a clash with big brother. The IRS has some major abilities to collect on the tax debt of others. One such way of collecting upon that debt is through tax liens.

Tax liens can be severe and devastating to an individual, and you should be cautioned to not put yourself in such a situation. If you do, you will undoubtedly be in the need of a tax debt attorney to assist you and possibly help you avoid the loss of your property.

What is a Tax Lien?

A tax lien is a lien imposed by the IRS and law upon properties of the debtor in an attempt to collect upon tax debt. In other words, the IRS can take ownership of your properties as payment for your debt. When a lien is placed you are left with a few options. One option is to get into contact with a tax professional (i.e. a tax debt attorney). In doing so, they may be able to work with the IRS to come to some sort of settlement that allows to you keep at least a portion of your positions under lien. If you choose to not act upon the lien then you will lose those properties to your debt. This consequence is one that most everyone wants to avoid if at all possible.

Your first step in avoiding a tax lien against your property is to attempt communication with the IRS. Contact them about your options for repayment and work with them to set up a plan for repayment. This will show them that you are making an attempt and they appreciate that fact.

Finding yourself in tax debt is not a welcome position to be in. Regardless of how you arrived at this point, the goal should be to find a way out of the strangle hold that this burden can cause. Many Americans find themselves facing the decision to seek help and relief from such burdens caused by back taxes. The good thing to remember though is that there is always a way out. The government offers many tax relief programs.

Getting Tax Debt Help

Sometimes, the answer may be as easy as contacting the IRS directly via phone or by visiting your local IRS center and speaking with a representative. Let’s face it: many of those in tax debt have the ability to pay their debt off but they just need a little assistance in doing so.

One of the most typical options the IRS offers to assist youis by arranging payments. They are very willing to sit down with you and determine what a fair amount is to make during monthly payments. One matter that you need to understand though is that by choosing this route you will be charged an initial penalty and you will also be required to pay interest on your balance. All in all, the extra charges are well worth the relief that you will feel from having been given an option to relieve yourself of the debt.

If the option of a IRS payment plan does not work for you or if you have found yourself so far in debt that it seems the amount is more than you can handle, then the IRS does negotiate reductions in the total amount owed. If you have reached the point of needing to choose this option, it is recommended that you do so with assistance. This process can be a bit more challenging and the help of a tax debt lawyer will most likely provide you with a better opportunity of succeeding.